Understanding Marketing Processes and Consumer Behavior CHAPTER 12

Understanding Marketing Processes and Consumer Behavior CHAPTER 12: 1

LEARNING OBJECTIVES • Explain the concept of marketing. • Explain the purpose of a marketing plan and identify the four components of the marketing mix. • Explain market segmentation and show it is used in target marketing. © 2009 Pearson Education, Inc. 2

LEARNING OBJECTIVES • Explain the purpose and value of marketing research. • Describe the key factors that Influence the consumer buying process. • Describe the international and smallbusiness marketing © 2009 Pearson Education, Inc. 3

What’s in It for Me? • Why does marketing matter to you? – By grasping this chapter’s presentation of marketing methods and ideas, you’ll benefit in two ways: • You’ll be better prepared to use marketing in your career as both employee and manager • You’ll be a more informed consumer with greater awareness of how businesses use marketing to gain your purchases © 2009 Pearson Education, Inc. 4

Discussion What is marketing? Can you see marketing elements around you? Give example. 5

What Is Marketing? • Marketing – “A set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders” (AMA) • Finding a need and fulfilling it with a new product or service. © 2009 Pearson Education, Inc. 6

What Is Marketing? “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. © 2009 Pearson Education, Inc. 7

What Is Marketing? • Providing Value and Satisfaction –Limited financial resources force us to be selective. –Consumers buy products that offer the best value when it comes to meeting their needs and wants. © 2009 Pearson Education, Inc. 8

What Is Marketing? (cont’d) • Value and Benefits – Value compares a product’s benefits with its costs. – Benefits include not only the functions of the product but also the emotional satisfaction associated with owning, experiencing, or possessing it. – Value = Benefits/Costs © 2009 Pearson Education, Inc. 9

Value and Utility 1. Form utility: Designing products customers want. 2. Time utility: Creating sales contracts that specify when the product will be delivered. 3. Place utility: Creating contracts that specify where the products will be delivered to the consumer. 4. Ownership utility: Arranging to transfer product ownership to customers by providing and setting sales prices, setting payment terms and providing ownership documents. 10

Discussion What is the difference between needs and wants? A need, if we refer back to Maslow’s Hierarchy of Needs, is something the consumer needs in order to live or function in his life or career. This could mean food, shelter, clothing, transportation, shoes, etc. What separates consumer need from want is money. Here is an example: I need a coat because it is cold outside. I want a fake fur coat that will look trendy in the clubs. 11

Goods, Services, and Ideas – Consumer goods: Tangible goods that consumers may buy for personal use: – Durable and non-durable goods. • Consumer marketing is used to inform people about these goods. – Industrial goods: Physical items used by companies to produce other products • Industrial marketing: used to inform companies about these goods. © 2009 Pearson Education, Inc. 12

Goods, Services, and Ideas – Services: Products with intangible (nonphysical) features • Service marketing is used to inform the public about these intangibles. • Relationship Marketing – Emphasizes building lasting relationships with customers and suppliers: results, customer satisfaction and retention. © 2009 Pearson Education, Inc. 13

Relationship Marketing • It is important to record any information you can obtain about your customers’ purchasing habits. • Data Warehousing and Data Mining are used for Building Customer Relationships © 2009 Pearson Education, Inc. 14

Relationship Marketing – Data warehousing: The compiling and storage of consumer data – Data mining: Automating the massive analysis of data by using computers to sift/select, sort, and search for previously undiscovered clues about what customers look at, react to, and how they might be influenced © 2009 Pearson Education, Inc. 15

The Marketing Environment Marketing strategies are not determined unilaterally by any business- they are influenced by powerful forces. They include: – Political-legal environment – Sociocultural environment – Technological environment – Economic environment – Competitive environment • Substitute products • Brand competition • International competition © 2009 Pearson Education, Inc. 16

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix. • Any business needs to develop a strategy for each of the elements in the marketing mix. Therefor they develop marketing plan for each of the 4 ps. – Marketing Plan • A detailed strategy for focusing marketing efforts on consumer needs and wants – In planning business develops the Marketing Mix: 4 Ps © 2009 Pearson Education, Inc. 17

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix • Product: Marketing begins with a product -a good, a service, or an idea designed to fill a consumer need or want. Meeting consumer needs is a constant challenge, © 2009 Pearson Education, Inc. 18

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix • Product differentiation is the creation of a feature or image that makes a product differ enough from competitive products to attract consumers. © 2009 Pearson Education, Inc. 19

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix • Product: Differentiating the product, positioning it in the marketplace, packaging the product and providing a product warranty. Developing a product is a challenge, why? © 2009 Pearson Education, Inc. 20

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix • Price: Selecting the best pricing strategy at which to sell a product. Price include: cost + profit margin. Price has to be convenient to customer. Price should be competitive. What are the factors influence price? © 2009 Pearson Education, Inc. 21

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix – Marketing Mix: 4 Ps • Place: Distributing a product through the proper channels. • Inventory and warehousing control and use of transportation are part of distribution. • Many manufacturers sell goods to other companies , which in turn distribute them to retailers. Others sell directly to major retailers or direct to final consumer. © 2009 Pearson Education, Inc. 22

What Is Marketing? (cont’d) • Strategy to develop The Marketing Mix – Marketing Mix: 4 Ps • Promotion: Communicating information about a product to its potential consumers. This includes advertising, sales promotion (trade show, coupon, free sample), public relations, personal selling, etc. © 2009 Pearson Education, Inc. 23

Four Cs: A. The sellers' four Ps are a mirror image of the buyers' four Cs: customer solution (product), customer cost (price), customer convenience (place), and customer communication (promotion). B. Together, these elements are known as the marketing mix. 24

Discussion Give examples about Advertising, sales promotion 25

Group work I need to buy Toyota car , I prefer silver color. The problem I don’t have enough money to pay. I may borrow from bank, it will cost me 20000$. In addition, I am unsure where to buy from, though I heard about the product from radio. Question: identify the marketing mix. 26

Marketing mix: product: car- color- brand Toyotadifferentiation. Price: 20, 000, borrowing- best value strategy. Place: unclear, may be from agent or car dealer. Promotion: radio advertising. 27

Target Marketing and Market Segmentation • Target Markets: Groups of people with similar wants and needs who can be expected to show interest in the same products. • Selecting the target group is first step in marketing strategies. Why? • The target marketing requires market segmentation. e. g. , Hyundai offers automobiles with various features at various prices. © 2009 Pearson Education, Inc. 28

Target Marketing and Market Segmentation • Market Segmentation –Dividing a market into categories of customer types or “segments”. –Market segment must share common traits that affect their purchasing decisions. © 2009 Pearson Education, Inc. 29

Segmentation variables: 1. Geographic: Areas of a country or region where buyers are located. E. g. , Urban areas do not need agricultural equipments. Also Sailboats sell better along coasts. 2. Demographic: Statistical information about age, income, sex, race, education, etc. 3. Psychographic: Values, attitudes and lifestyles of a consumer or group of consumers, e. g. , family size affect size and type of purchasing. © 2009 Pearson Education, Inc. 30

PRODUCT POSITIONING A. PRODUCT POSITIONING : The establishment of an easily identifiable image of a product in the minds of consumers. B. Product positioning is based on the important attributes that consumers use to assess the product. For example, a low-priced car like a Ford Focus tends to be positioned on the basis of economy, C. while a Porsche is positioned in terms of high performance. 31

TABLE 11. 1 Demographic Variables © 2009 Pearson Education, Inc. 32

Case study I decided to buy a suit for my self. I wondered where to go. At the end I went to men’s wear shop. The shop specialized in selling suits for men only, specially matured of age over 20 years. Question: identify the segmentation categories in this case. 33

Market Research A. Which is the study of what buyers need and how best to meet those needs, can address any element In the marketing mix. B. Market research can greatly Improve the accuracy and effectiveness of market segmentation. 34

The Research Process A. Indentifying the needs & wants to be satisfied. Study the current situation. What is the need and what Is currently being done to meet It. B. Select a research method. In choosing a method, marketers must bear in mind the effectiveness and costs of different methods. The four basic types : observation, survey, focus groups, and experimentation. 35

The Research Process A. Collect data. Secondary data are information already available as a result of previous research by the firm or other organizations. Primary data-new research by the firm or its agent&-must be obtained. B. Analyze the data. C. Prepare a report. This report normally includes a summary, methodology and findings, various alternative solutions (where appropriate), and recommendations. 36

Understanding Consumer Behavior • It is important that we understand how and why consumers behave the way they do when making purchases. • There are four influences on consumer behavior. These include: 1. Psychological influences: These influences can include a person’s values, attitudes ability to learn. E. g. , he prefers to buy some products because he like them. © 2009 Pearson Education, Inc. 37

Understanding Consumer Behavior 2. Personal influences: These influences can include personal preferences based on personality, life style, life-cycle, economic status (income). (demographic) 3. Social influences: These influences can include social status, having the latest or greatest version of an item. E. g. , influence of reference groups such as friends 4. Cultural influences: These influences can include behaviors or beliefs specific to one’s cultural heritage. E. g. , the cultural ranking of groups according to criteria such as background, occupation, religion and income. E. g. , Muslims buy halal meat. © 2009 Pearson Education, Inc. 38

Understanding Consumer Behavior • Brand Loyalty –Consumers who regularly purchase products because they are satisfied with their performance © 2009 Pearson Education, Inc. 39

FIGURE 11. 1 The Consumer Buying Process • ProblemNeed Recognition • Information Seeking • Evaluation of Alternatives © 2009 Pearson Education, Inc. 40

Organizational Marketing and Buying Behavior • Organizational Markets 3 types: –Industrial Markets • Businesses that buy goods to be converted into other products or that are used up during production (equipment, raw materials). © 2009 Pearson Education, Inc. 41

Organizational Marketing and Buying Behavior • Organizational Markets 3 types: – Reseller Markets • Intermediaries, including wholesalers and retailers, that buy and resell finished goods – Government and Institutional Markets • Federal and state governments • Nongovernmental organizations © 2009 Pearson Education, Inc. 42

Organizational Marketing and Buying Behavior (cont’d) • Organizational Buying Behavior – Differences in Buyers • Organizational buyers are professionals who negotiate the buyer-seller agreement (purchase terms) – Specialists in purchasing a line of items – Experts about the products purchased © 2009 Pearson Education, Inc. 43

Group work Draw example on Government and Institutional Markets in Gaza 44

Organizational Buying Behavior • The differences in buyer-seller relationships in organizational markets versus consumer markets include the following: 1. Organizational buyers usually make frequent purchases. 2. Organizational buyers form enduring long-term relationships. 3. Buyers and sellers in organizational markets may work closely. 4. Organizational marketing also puts a heavy emphasis on personal selling. © 2009 Pearson Education, Inc. 45

Discussion Who can describe the buying behavior of supermarket in relation with a wholesale, in light of the previous slide. 46

What Is a Product? • Product Defined – A value package/set that provides a bundle of benefits and features to satisfy the needs and wants of customers • Product Features – Tangible and intangible qualities built into a product • Benefits – The tangible and intangible outcomes associated with acquisition or use of a product © 2009 Pearson Education, Inc. 47

TABLE 11. 2 Categories of Consumer Products © 2009 Pearson Education, Inc. 48

TABLE 11. 3 Industrial Products © 2009 Pearson Education, Inc. 49

The Product Mix • Product Mix – The group of products (consumer, industrial, or both) that a company makes available for sale. E. g. , IUG products. • Product Line – A group of products that are closely related because they function in a similar manner or are sold to the same customer group who will use them in similar ways. © 2009 Pearson Education, Inc. 50

The Product Mix • Multiple (or Diversified) Product Lines – Allow a company to grow rapidly and can help to offset the consequences of slow sales in any one product line. –Please give an example of a product line for a consumer products company © 2009 Pearson Education, Inc. 51

Developing New Products • The New Product Development Process – Research and development (R&D) • Departments for exploring new product possibilities – Product mortality rates • Few product ideas (1 in 50) actually reach the market – Speed to market • Responding to customer demand or market changes by introducing new products to the market ahead of competitors © 2009 Pearson Education, Inc. 52

FIGURE 11. 2 Products in the Life Cycle: Stages, Sales, Cost and Profit © 2009 Pearson Education, 53 Inc.

Identifying Products –Branding Products • Branding –A process of using symbols to communicate the qualities of a particular product made by a particular producer » Signals uniform quality and stimulates consumer recall. E. g. , K cheeze, coca cola. © 2009 Pearson Education, Inc. 54

Identifying Products • Branding Products • Consumer preference for a particular product – Brand awareness • The brand name that comes first to mind when consumers consider a particular product category © 2009 Pearson Education, Inc. 55

Identifying Products (cont’d) • Gaining Brand Awareness: Requires several methods of promotion including: – 1 Product placement • A promotional tactic for brand exposure in which characters in television, film, music, magazines, or video games use a real product that is visible to viewers. E. g. , when people drinking coca cola during football game TV watching. © 2009 Pearson Education, Inc. 56

Gaining Brand Awareness • Requires several methods of promotion including: – 2 Buzz marketing • A form of word-of-mouth marketing. They give sample to people and ask them to tell friends about it. – 3 Viral marketing • Form of Buzz marketing that relies on Internet to spread information like a “virus” from person-to-person about products and ideas © 2009 Pearson Education, Inc. 57

Packaging Products –Purposes of packaging 1. Reduce the risk of damage, breakage, or spoilage 2. Increase the difficulty of stealing small products 3. Serves as an in-store advertisement that makes the product attractive © 2009 Pearson Education, Inc. 58

Packaging Products –Purposes of packaging 1. Displays the brand name 2. Identifies features and benefits 3. Enhances the utility of the product features and benefits © 2009 Pearson Education, Inc. 59

The International Marketing Mix 1. International products: Products sold internationally need to adapt to the needs of consumers in the foreign market. 2. International pricing: There will probably be higher transportation and selling costs abroad, but pricing cannot be raised just for this reason. A marketer needs to take into account the income of the consumers, currency exchange rates and competitive pricing. © 2009 Pearson Education, Inc. 60

The International Marketing Mix 1. International distribution: access to a distribution network in foreign markets. For example, in many parts of the world the super or hyper market concept is new and only exists within major cities. How will the company distribute and sell its products in the outlying/remote areas of a country? 2. International promotion: Promotion requires cultural sensitivity and hence adjustments to the marketing mix. © 2009 Pearson Education, Inc. 61

Small Business and the Marketing Mix • Small-Business Products – Product failures due to lack of market potential for products or marketing to the wrong target market segments • Small-Business Pricing – Losses due to pricing errors resulting from underestimating operating expenses © 2009 Pearson Education, Inc. 62

Small Business and the Marketing Mix • Small-Business Distribution –Poor location choice fails to attract customers • Small-Business Promotion –Careful promotion can reduce expenses. It requires budget. © 2009 Pearson Education, Inc. 63